Supreme Court settles turf war between TRAI and CCI

By Karthik Somasundram and Sneha Jaisingh, Bharucha & Partners
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Reliance Jio has, without doubt, caused a revolution in the telecommunications industry, but it also created a conflict between two regulators – the Competition Commission of India (CCI) and the Telecom Regulatory Authority of India (TRAI). The conflict was settled by the Supreme Court in the Competition Commission of India v Bharti Airtel Limited & Ors (2018) case.

In July 2016, Jio raised demands for points of interconnection (PoIs) from existing telecom service providers, also known as incumbent dominant operators (IDOs). PoIs are regulated in terms of interconnection agreements as prescribed by TRAI.

Karthik-Somasundram-Bharucha-&-Partners
Karthik Somasundram
Partner
Bharucha & Partners

Although the IDOs provided PoIs to Jio, the latter complained that they were inadequate as it resulted in call failures for Jio subscribers. According to Jio, the IDOs were indulging in anti-competitive behaviour by not providing sufficient PoIs. The IDOs, on the other hand, claimed that Jio’s demand for PoIs was not compliant with the interconnection agreements, and that call drops and failures were caused by Jio’s offer of free calls to its subscribers. They further claimed that they had provided more PoIs than required and that call failures were also a result of technical incompatibilities in Jio’s VoLTE network.

Jio complained to TRAI alleging anti-competitive behaviour by the IDOs. TRAI, in October 2016, passed orders holding the IDOs in breach of licence conditions, and made recommendations to the Department of Telecommunications (DoT) for imposing penalties on the IDOs.

TRAI’s recommendations were challenged by the IDOs in Delhi High Court, and the DoT, in April 2017, referred the issue back to TRAI for a reconsideration. TRAI’s order holding the IDOs in breach, therefore, had not attained finality.

Sneha-Jaisingh-id
Sneha Jaisingh
Managing associate
Bharucha & Partners

Following TRAI’s October 2016 order, Jio filed complaints with the CCI against the IDOs and telecom industry body, Cellular Operators Association of India (COAI), alleging cartelization and anti-competitive practices. The CCI passed a preliminary order in April 2017 by a 3:2 majority, directing the Director General to investigate the complaints. The CCI’s order was challenged by the IDOs in Bombay High Court, which set aside the order. The CCI and Jio then challenged this before the Supreme Court, which affirmed the high court decision.

The Supreme Court noted that TRAI was constituted for regulating the telecom sector, to ensure orderly and healthy growth of telecommunication infrastructure and protecting and promoting interests of consumer and service providers, and the CCI’s role is to curb anti-competitive practices, promote and sustain competition and to ensure freedom of trade across product and geographic markets. TRAI is the sectoral regulator and the CCI is the market regulator across all sectors.

The court noted that the dispute was concerned with the interpretation of interconnection agreements; the statutory regime and the terms of the telecommunication licenses and therefore it was incumbent on the industry regulator to decide on it. TRAI’s determination that the IDOs were in breach would constitute jurisdictional facts based on which the CCI could exercise its jurisdiction.

As TRAI had not determined with finality that the IDOs were in breach of the interconnection agreements and that they had acted in concert, no jurisdictional fact was established to give the CCI jurisdiction.

The court, however, rejected the contention of the IDOs that TRAI, as the sectoral regulator, had exclusive jurisdiction to rule on competition-related aspects in the industry. It ruled that if TRAI had determined that the IDOs had formed a cartel or colluded to block Jio’s entry, the CCI then would have jurisdiction to decide whether the IDOs’ actions had an appreciable adverse effect on competition. While TRAI’s powers of sanction were limited by the TRAI Act, the CCI had the power to prescribe and enforce structural remedies to promote genuine competition in the telecom sector. The court prescribed comity between TRAI and the CCI in the discharge of their roles.

The Supreme Court disagreed with the high court and held that the CCI’s order merely directing a preliminary investigation was an administrative order as it did not determine or affect the rights of the parties. However, even administrative orders must be supported by reasons, but the CCI order was not as no jurisdictional facts had been established.

The high court was, therefore, right in exercising writ jurisdiction under article 226 of the constitution and setting aside the CCI order, but it should not have ruled on the merits of the order, the court observed.

Karthik Somasundram is a partner and Sneha Jaisingh is a managing associate at Bharucha & Partners.

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